Potential fiscal cliff deal still being debated

December 14, 2012

No resolution on the fiscal cliff has been reached, despite the efforts of President Obama and House Speaker John Boehner at the White House Thursday, according to Lori Montgomery and Paul Kane..

After the 50-minute session in the Oval Office, aides to both men described the meeting as a frank exchange and said the lines of communication remained open. But Boehner prepared to return to Ohio for the weekend, with no further negotiations on his schedule.

The late-afternoon invitation from the president surprised senior Republicans. But it did nothing to dispel the sense that hope is all but lost for a far-reaching agreement to raise taxes, cut spending and avert the year-end cliff.

Obama’s top economic adviser, Gene Sperling, confirmed the gloomy outlook in a closed-door lunch meeting Thursday with Senate Democrats, according to those present.

Senior Senate Republicans, meanwhile, were at work on a fallback plan that would not significantly restrain the national debt but would at least avert widespread economic damage by canceling tax increases scheduled to take effect next year for the vast majority of Americans. That strategy calls for Republicans to capitulate to Obama’s demand to let tax rates rise on wage and salary income for the wealthiest 2 percent of taxpayers.

But the approach would also seek to thwart the Democrats by trying to block other steps that would increase taxes paid by wealthy taxpayers, including higher rates on investment income and limits on the value of itemized deductions. This strategy would produce only about $440 billion in new taxes and give the Democrats even less revenue than Republicans had previously put on the table. In his initial offer earlier this month, Boehner had said he could support $800 billion in new tax revenue.

With a relatively low price in new taxes, the strategy, if successful, would represent a tactical victory for Republicans and shift the political burden onto Democrats to make greater concessions on federal spending.

Senate Minority Leader Mitch McConnell (R-Ky.) has floated the strategy among Republicans in both chambers, according to lawmakers and senior GOP aides. It has been rejected by Boehner and other House leaders, aides said.

Don Stewart, a spokesman for McConnell, denied that he was floating the idea. “The leader has held numerous discussions to hear input from his members, and many ideas have been raised,” he said.

But top GOP policy aides continued to refine the plan Thursday as a growing number of Senate Republicans clamored for action to prevent the fiscal crisis — for which, polls show, Republicans would be blamed.

So what’s next for the fiscal cliff talks? According to Rachel Weiner, no one knows.

Not one single event is currently scheduled for Friday on Capitol Hill to address the approaching “fiscal cliff.”
Most members of Congress left town Thursday night, with no plans to return until the Senate reconvenes Monday afternoon and the House comes back on Monday evening. Senate Majority Leader Harry M. Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) were seen leaving the Capitol Thursday around 6:30 p.m. Even House Speaker John A. Boehner (R-Ohio) – who last week vowed to stay in Washington to work on a deal with President Obama – plans to travel this weekend to his home state of Ohio after a frank exchange at the White House Thursday night that lasted about 50 minutes. 

As of this early Friday hour, there is no real sense of what comes next. All of this could change in the coming hours, with word of new talks, new proposals and renewed hope for a deal before Christmas or New Year’s Eve.

But for now, nothing.

Non-profits have been facing off with the White House over fiscal cliff negotiations, Jerry Markon and Peter Wallsten said.

The White House and the nation’s most prominent charities are embroiled in a tense behind-the-scenes debate over President Obama’s push to scale back the nearly century-old tax deduction on donations that the charities say is crucial for their financial health.

In a series of recent meetings and calls, top White House aides have pressed nonprofit groups to line up behind the president’s plan for reducing the federal deficit and averting the year-end “fiscal cliff,” according to people familiar with the talks.

In part, the White House is seeking to win the support of nonprofit groups for Obama’s central demand that income tax rates rise for upper-end taxpayers. There are early signs that several charities, whose boards often include the wealthy, are willing to endorse this change.

But the White House is also looking to limit the charitable deduction for high-income earners, and that has prompted frustration and resistance, with leaders of major nonprofit organizations, such as the United Way, the American Red Cross and Lutheran Services in America, closing ranks in opposing any change to the deduction.

“It’s all castor oil,” said Diana Aviv, president of Independent Sector, an umbrella group representing many nonprofits. “And the members of the nonprofit sector I represent don’t want any part of it. It’s a medicine we’re not willing to drink.”

The dispute is the latest in a long-standing struggle over the popular tax provision, which allows people to deduct charitable donations from their taxable income. The battle is playing out at the highest levels of government and in the corridors of K Street.

Since Obama first proposed to lower the deduction in 2009, more than 60 nonprofit groups have spent at least $21 million lobbying Congress and the White House to preserve it, lobbying records show. Although nonprofit officials characterize the effort as grass roots, including a recent “Lobby Day” during which the groups’ staffers donated their time and descended on Capitol Hill, at least 25 organizations have hired Washington area lobbying firms.

The lobbying by some of the biggest players in the philanthropy world has intensified in recent weeks amid spreading concern over whether the charitable deduction could be affected by a deal to avoid the automatic spending cuts and tax increases set to kick in Jan. 1. Nonprofit group leaders say lowering or eliminating the deduction would reduce giving by wealthy donors. Studies have shown that people would donate less if the deduction were reduced, but estimates of the effect vary widely.

But the general consensus among Americans is “to let the rich pay for it,” Aaron Blake said.

President Obama and House Republicans are still attempting to hammer out a deal on the so-called “fiscal cliff,” and the American people have one message for them:

Let rich people pay for it.

We’ve written for a while on this blog about how letting the Bush tax cuts for the wealthy expire is overwhelmingly popular.

But when it comes to other potential pieces of a “fiscal cliff” deal, that theme also holds true. Essentially all the popular ideas would have much more of an effect on rich people, while the ones that affect the country more equitably poll poorly (and often very poorly) basically without exception.

Besides raising taxes on the wealthy, other proposals that get majority support in a new Pew Research Center poll include reducing Medicare benefits for more wealthy recipients (51 percent support), reducing Social Security benefits for more wealthy recipients (51 percent), limiting tax deductions (54 percent), and raising the tax rate on investment income (52 percent).

(While deductions and investment income also affect the middle class, wealthy people tend to find and take more deductions — not to mention the middle class would be less affected by capping them — and rich people tend to have much more money invested.)

Meanwhile, no other proposal gets majority support, including reducing military spending (43 percent support), raising the eligibility age for Medicare (41 percent), raising the eligibility age for Social Security (42 percent), limiting the home mortgage interest deduction (41 percent), reducing federal funding for programs that help the poor (38 percent), reducing infrastructure spending (30 percent) and reducing education funding (21 percent).

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